Corinthian Colleges: Biden administration cancels $5.8 billion in student loan debt for former students - CNNPolitics
S E E D E D C O N T E N T
Washington (CNN)The Department of Education announced Wednesday that it will cancel $5.8 billion in student loan debt for 560,000 borrowers who attended the now-defunct network of for-profit schools known as Corinthian Colleges.
The cancellation amounts to the largest one-time discharge ever made by the Department of Education. Some of Corinthian's former students were already eligible for debt cancellation, but the new action will ensure that all borrowers who attended from Corinthian's founding in 1995 through its closure in April 2015 will get debt relief. RELATED: Student loan forgiveness divides Americans more by party and age than by education At its peak in 2010, Corinthian Colleges enrolled more than 110,000 students at 105 campuses, including some called Everest, Heald College or WyoTech. The Department of Education has found that Corinthian Colleges misled prospective students about the ability to transfer credits and falsified its job placement rate.
In 2013, Vice President Kamala Harris -- who was California's attorney general at the time -- sued Corinthian Colleges, alleging the school was engaging in deceptive and false advertising and recruitment. The lawsuit triggered other federal and state investigations that ultimately resulted in Corinthian selling most of its campuses in 2014 and closing the remaining ones in 2015.
Political pressure to cancel student debt
Wednesday's announcement is the latest -- and biggest -- action taken by the Biden administration to cancel federal student loan debt for borrowers who were defrauded by their for-profit colleges. The administration has also made it easier for permanently disabled borrowers as well as public sector workers to receive debt relief. RELATED: Biden is considering canceling some student debt. Here's why it might not be such a great idea The new announcement brings the total student loan debt cancellation approved under the Biden administration to $25 billion since January 2021. President Joe Biden has also extended the pandemic-related payment pause several times -- most recently moving the expiration date from May 1 to August 31. But the administration's piecemeal approach to canceling student loan debt fails to satisfy many other Democrats who have been calling on Biden to broadly cancel up to $50,000 of student loan debt for each of the 43 million borrowers. So far, Biden has resisted that pressure, but has said he is open to canceling some federal student loan debt. On the campaign trail, he proposed canceling a minimum of $10,000 in student debt per person as a response to the pandemic, as well as forgiving all undergraduate tuition-related federal student debt from two- and four-year public colleges and universities for those borrowers earning up to $125,000 a year. Here's who could benefit if Biden cancels $10,000 in student loan debt per borrower It's not totally clear that the President's executive authority allows him to broadly wipe away student debt. Last year, Biden directed lawyers at the Departments of Education and Justice to evaluate whether he does, in fact, have the power to broadly cancel federal student loan debt. The administration has not disclosed those findings. But a September 2020 memo from lawyers at Harvard University's Legal Services Center and its Project on Predatory Student Lending argues that Congress has given the power to broadly cancel federal student debt to the Department of Education through a law known as the Higher Education Act. It gives the education secretary the authority "to create and to cancel or modify debt owed under federal student loan programs," the memo says.
Defrauded borrowers get relief
The fight to cancel Corinthian student debt began in 2014, when a group of students joined with a group called the Debt Collective. They organized the nation's first student debt strike, refusing to make their student loan payments. Former Corinthian students will now see their remaining federal student loan debt canceled automatically. Students who believe they were defrauded by their college are generally required to file what's known as a borrower defense to repayment claim with the Department of Education.
The Biden administration has been chipping away at a backlog of these claims that built up during the Trump administration. It has now canceled $7.9 billion for 690,000 borrowers whose institutions took advantage of them. In some cases -- like the action announced Wednesday -- the government has decided that a whole group of students who attended a certain school at particular times are due relief. Advocacy groups say they hope the latest Corinthian action paves the way for future discharges for groups of borrowers. "This announcement also sets the stage for future group-wide discharges for other for-profit schools including ITT Tech and Art Institute, and for broad based cancellation of all student debt," said Thomas Gokey, co-founder of the Debt Collective, in a statement. This story has been updated with additional information.
CNN's Nikki Carvajal contributed to this report.
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It is not the role of government to pay back citizens who were the victims of fraud.
Nor is it government's role to forgive millions of dollars of debt that was willingly incurred.
Instead of making that debt disappear, demand payment, and earmark the money to go to secure schools to protect kids and teachers instead of waiting on some new gun law which won't do the job and probably won't be enforced.
I have to agree. So because this fake college defrauded 100's of thousands of students the gov't is going to take it on the chin
Not really the govt., taxpayers.
The govt. will simply borrow more.
I don't trust these online colleges.
Imo community college should be part of the public school systems and free to enroll. I know more kids that are doing it these days. Get some credits under their belt for two years instead of having to go a full four years at a private institution.
As far as debt, maybe something could be set up like a fund or payment option where there would be little to no interest.
That is the best way to start your higher public ed. My daughter took advanced placement classes in high school and she was actually able to graduate college in 4 years. Many nursing students take up to 5 years to graduate
Who pays this?
Imo of they are going to cancel college debt, might as well make it free to all. Same thing really. Except the colleges still get paid.
Well, the roughly 50% of the US taxpaying public, of course.
And the student that, in essence, defaulted on their loan has a degree in the mating habits of sea slugs.
It might be part of the $1 trillion that we will borrow this year. Federal debt held by the public is projected to reach 110% of GDP by 2032 which will be higher than our debt following WWS II.
All government debt forgiveness requires a 1099-C be filed with the IRS
which counts the "forgiven" dollars as taxable income.
So in part, the forgiven will be paying back about 15%...in income tax.
Some much more, some much less.
unless there is legislation which eventually changes it.
But this has been the practice at Social Security and other Federal agencies for decades.
Seems to me, that is putting them in the same boat. Instead of owing on a loan, they would owe the Federal government.
The second thing to consider when taking debt forgiveness
is its impact on your FICO score. It is almost always a negative impact
for 7 years
which will drive up the cost of future borrowing costs of the "forgiven" person.
Debt forgiveness isn't all that great depending on your specific circumstances.
A relative went through this, because she was on SSD, she went nuts cancelling her own loans and children's college loans she cosigned for.
She ended up with a huge tax bill she could not afford and then could not get a loan.
Ended up negotiating a long-term payment plan with the IRS plus loads of penalties.
The Fed won a settlement of $530 million already and is preparing to sue again because CC was able to
transfer or sell off assets before the suit.
Not likely we the taxpayers will ever see a penny, regardless of the judgements.
In the end we will spend more in lawyer fees and gain zero.
The CNN article is missing a piece that other news organizations had.
Isn't that nice... If you still owe money on a student loan but have been making payments you can get a refund on those payments. But if you have already paid off that student loan then you get nothing.
Can anybody explain how this is nothing more than an election year stunt to help bring the younger voters back to the Democrat Party?
If they can they are completely full of shit.
This is unfair to parents that saved and sacrificed for their children's education, the college students who worked to pay and all those who paid their bills. What do we get?
The bill.
A sharp stick in the eye. Hopefully it’s not a dirty stick ...
Student loan forgiveness is just as stupid of a concept as free college.
Since I’ve already attended college, I prefer free steak or at least chicken.